North American Electric Reliability Corporation Savings and - NERC

North American Electric Reliability Corporation Savings and Investment Plan Financial Statements and Supplemental Schedule December 31, 2010

North American Electric Reliability Corporation Savings and Investment Plan Contents December 31, 2010

Page(s)

Independent Auditors’ Report ................................................................................................................................ 1

Financial Statements

Statements of Net Assets Available for Benefits ........................................................................................................ 2

Statement of Changes in Net Assets Available for Benefits ...................................................................................... 3

Notes to Financial Statements ................................................................................................................................ 4–9

Supplemental Schedule

Schedule of Assets (Held at End of Year) ............................................................................................................... 10

Independent Auditors' Report Board of Trustees North American Electric Reliability Corporation Savings and Investment Plan We were engaged to audit the accompanying statement of net assets available for benefits of North American Electric Reliability Corporation Savings and Investment Plan (the “Plan”) as of December 31, 2010, and the related statement of changes in net assets available for benefits for the year ended December 31, 2010, and the supplemental schedule of assets (held at end of year) as of December 31, 2010. These financial statements and supplemental schedule are the responsibility of the Plan’s management. As permitted by 29 CFR 2520.103-8 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, the plan administrator instructed us not to perform, and we did not perform, any auditing procedures with respect to the information summarized in Note 3, which was certified by Vanguard Fiduciary Trust Company, the custodian of the Plan, except for comparing the information with the related information included in the financial statements and supplemental schedule. We have been informed by the plan administrator that the custodian holds the Plan’s investment assets and executes investment transactions. The plan administrator has obtained a certification from the custodian as of and for the year ended December 31, 2010, that the information provided to the plan administrator by the custodian is complete and accurate. Because of the significance of the information that we did not audit, we are unable to, and do not, express an opinion on the accompanying 2010 financial statements and supplemental schedule taken as a whole. The form and content of the information included in the 2010 financial statements and supplemental schedule, other than that derived from the information certified by the custodian, have been audited by us in accordance with auditing standards generally accepted in the United States of America and, in our opinion, are presented in compliance with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. We have compiled the accompanying statement of assets available for benefits as of December 31, 2009, in accordance with Statement on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements, information that is representation of management. We have not audited or reviewed the accompanying 2009 statement of net assets available for benefits and, accordingly, do not express an opinion or any other form of assurance on it.

October 11, 2011

North American Electric Reliability Corporation Savings and Investment PlanStatements of Net Assets Available for BenefitsDecember 31, 2010 and 2009

2010 2009(Compiled)

AssetsInvestments, at fair value:

Mutual funds 19,303,435$ 15,297,264$

Receivables:Participant contributions 44,776 41,298 Employer contributions 1,335,828 1,148,443 Participant loans 157,353 99,595

1,537,957 1,289,336

Net assets available for benefits 20,841,392$ 16,586,600$

The accompanying notes are an integral part of these financial statements.2

North American Electric Reliability Corporation Savings and Investment PlanStatement of Changes in Net Assets Available for BenefitsYear Ended December 31, 2010

AdditionsAdditions to net assets attributed to:

Investment income:Net appreciation in fair value of investments 1,674,339$ Interest and dividends 333,675

Total investment income 2,008,014

Participants loan interest 9,181

ContributionsEmployer 1,698,929 Participants 1,290,553 Rollovers 164,973 Other receipts 22

Total contributions 3,154,477 Total additions 5,171,672

DeductionsDeductions from net assets attributed to:

Benefits paid to participants 916,680 Administrative expenses 200

Total deductions 916,880

Net increase 4,254,792

Net assets available for benefitsBeginning of year 16,586,600

End of year 20,841,392$

The accompanying notes are an integral part of these financial statements.3

North American Electric Reliability Corporation Savings and Investment Plan Notes to Financial Statements Year Ended December 31, 2010

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1. Description of Plan The following description of the North American Electric Reliability Corporation Savings and Investment Plan (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

General The Plan was established in January 1984 and was restated and amended effective January 1, 2010. The Plan is a defined contribution plan covering all eligible employees of North American Electric Reliability Corporation (the “Company” or “Employer”).

Eligibility and Contributions Employees who are at least 21 years of age are eligible to participate in the Plan on the first day of the quarter after the completion of three months of employment. Participants may make elective salary deferral contributions to the Plan, which are not to exceed statutory limits. The Company makes matching contributions equal to 75% of each participant’s salary deferral contributions limited to 75% of 6% of the participant’s eligible compensation. Matching contributions were approximately $290,000 for the year ended December 31, 2010, net of forfeitures. The Company also makes an additional defined contribution equal to 10% of eligible compensation, provided that the participant has worked 1,000 hours in the Plan year. Additional defined contributions for the year ended December 31, 2010 were approximately $1,333,000.

Vesting A participant is immediately 100% vested in his or her salary deferral contributions plus actual earnings thereon. A participant is also immediately 100% vested in employer matching contributions plus actual earnings thereon. Participant’s vesting in the Company's additional defined contribution portion of accounts plus actual earnings thereon is according to the following schedule:

Percentage Accrued Completed Years of Service Benefit Vested

Less than 2 0% 2 25% 3 50% 4 75% 5 100%

Forfeitures The portion of a participant’s account balance, which is not vested upon termination of employment, is forfeited and remains in the Plan. The forfeited portion of the account balance is applied as a reduction of future contributions made by the Company to the Plan, and is allocated to the participants as part of the total contribution made to the Plan. Forfeitures amounted to approximately $310,500 in 2010, of which approximately $293,500 were used to reduce employer contributions in 2010, with an approximate balance of $17,000 available to be applied against future employer contributions as of December 31, 2010. There was no forfeiture balance available as of December 31, 2009.

Participant Accounts Individual accounts are maintained for each Plan participant. Each participant’s account is credited with their deferral contributions, employer contributions and the earnings thereon. Contributions to the Plan are invested by the custodian as directed by the participants. Each participant may elect from one or more of the investment vehicles offered pursuant to the provisions of the Plan.


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Payment of Benefits A participant’s vested interest in the Plan’s assets is distributable generally upon termination, disability, retirement or death. In addition, participants may request withdrawals pursuant to specific guidelines as set forth in the Plan.

Termination and Amendment of Plan Although it has not expressed any intent to do so, the Company reserves the right to terminate or amend the Plan at any time subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). If the Plan is terminated, the amount credited to the account of each participant becomes fully vested.

Participant Loans Each participant is permitted to borrow up to 50% of his or her vested account balance to a maximum of $50,000. The term of a loan may not exceed five years, unless it is used to purchase a principal residence. Loans are measured at their unpaid principal balance plus any accrued, but unpaid interest. Interest rates are based on prevailing rates at the inception of these loans (ranging from 4.25% to 9.50% at December 31, 2010). Principal and interest is paid ratably through semi-monthly payroll deductions.

Plan Expenses Substantially all expenses incurred in the administration of the Plan are paid directly by the Company.

2. Summary of Accounting Policies

Basis of Accounting The financial statements of the Plan are prepared on the accrual basis of accounting.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Benefit Payments Benefits are recorded when paid.

Investment Valuation Plan investments are reflected in the accompanying statements of net assets available for benefits at fair value as determined by management (see Note 4). The sales and purchases of investment securities, and gains and losses on the sale of investments, are recognized at the trade date. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Net appreciation includes the Plan’s gains and losses on investments bought and sold, as well as held during the year. Subsequent Events The Plan has evaluated subsequent events through October 11, 2011, the date the financial statements were available for issuance. All subsequent events requiring recognition as of December 31, 2010 have been incorporated in these financial statements.


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3. Financial Information Certified by the Plan’s Custodian (Unaudited)

The following is a summary of the investment and participant loan information regarding the Plan as of December 31, 2010 and 2009, and for the year ended December 31, 2010, included in the Plan’s financial statements and supplemental schedule, that was prepared or derived from information provided by Vanguard Fiduciary Trust Company (“Vanguard”), the Plan’s custodian. The plan administrator has obtained a certification from the custodian that such information is complete and accurate.

Information relating to investments and loans held by the custodian at December 31, is as follows:

2010 2009

Mutual FundsVanguard Prime Money Market Fund 1,988,113$ * 1,788,511$ *Neuberger Berman Genesis Fund; Institutional Class 5,438 - Vanguard 500 Index Fund Investor Shares 1,897,814 * 1,546,306 *Vanguard Explorer Fund Investor Shares 1,081,685 * 736,677 Vanguard Extended Market Index Fund Investor Shares 754,558 565,502 Vanguard International Growth Fund Investor Shares 918,412 694,649 Vanguard Morgan Growth Fund Investor Shares 811,010 700,578 Heartland Value Plus Fund 9,122 - Vanguard Small-Cap Growth Index Fund 5,422 - Vanguard Target Retirement 2015 Fund 348,438 423,389 Vanguard Target Retirement 2025 Fund 932,882 498,309 Vanguard Target Retirement 2035 Fund 1,185,878 * 787,271 Vanguard Target Retirement 2045 Fund 385,232 228,157 Vanguard Target Retirement Income 414,080 370,381 Vanguard Total Bond Market Index Fund Investor Shares 3,091,202 * 2,522,336 *Vanguard Total International Stock Index Fund 1,632,361 * 1,395,886 *Vanguard Wellington Fund Investor Shares 1,159,135 * 868,400 *Vanguard Windsor Fund Investor Shares 1,589,564 * 1,199,293 *Vanguard Windsor II Fund Investor Shares 1,093,089 * 971,619 *

Participant loans 157,353 99,595

19,460,788$ 15,396,859$

* Represents investments in excess of 5% of net assets available for benefits at end of year. The following was also certified by the custodian for the year ended December 31, 2010:

New appreciation in fair value of investments 1,674,339$

Interest and dividends income, investments 333,675$

Participants loan interest 9,181$


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4. Fair Value Measurements

The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques need to maximize the use of observable inputs and minimize the use of unobservable inputs. Valuation techniques used to measure fair value are defined as follows:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or

liabilities in active markets that the plan has the ability to access.

Level 2 - Inputs to the valuation methodology include: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in inactive markets; (c) inputs other than quoted prices that are observable for the asset or liability; and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value

measurement.

Following is a description of the valuation methodology used for assets measured at fair value. There have been no changes in the methodology used at December 31, 2010 and 2009:

Mutual funds: Valued at quoted market prices which represent the net asset value (“NAV”) of the

shares held by the Plan at year-end, which is a practical expedient. The NAV is a quoted market price in an active market, which represents the fair value of the securities held by the mutual fund at year-end.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.


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Assets at fair value as of December 31, 2010 are as follows:

Level 1 Level 2 Level 3 Total

Mutual FundsMoney market fund 1,988,113$ -$ -$ 1,988,113$ Domestic balanced 3,266,510 - - 3,266,510 Bond 3,091,202 - - 3,091,202 Large-cap value 3,841,788 - - 3,841,788 Large-cap blend 1,897,814 - - 1,897,814 Large-cap growth 811,010 - - 811,010 Mid-cap blend 754,558 - - 754,558 Mid-cap growth 5,438 - - 5,438 Small-cap value 9,122 - - 9,122 Small-cap growth 1,087,107 - - 1,087,107 Foreign large-cap growth 918,412 - - 918,412 Foreign large-cap blend 1,632,361 - - 1,632,361

Total assets at fair value 19,303,435$ -$ -$ 19,303,435$

Assets at fair value as of December 31, 2009 are as follows:

Level 1 Level 2 Level 3 Total

Mutual FundsMoney market fund 1,788,511$ -$ -$ 1,788,511$ Domestic balanced 2,307,507 - - 2,307,507 Bond 2,522,336 - - 2,522,336 Large-cap value 3,039,312 - - 3,039,312 Large-cap blend 1,546,306 - - 1,546,306 Large-cap growth 700,578 - - 700,578 Mid-cap blend 565,502 - - 565,502 Small-cap growth 736,677 - - 736,677 Foreign large-cap growth 694,649 - - 694,649 Foreign large-cap blend 1,395,886 - - 1,395,886

Total assets at fair value 15,297,264$ -$ -$ 15,297,264$

5. Related Party Transactions

Certain Plan investments are shares of mutual funds managed by Vanguard. Vanguard is the custodian as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid to Vanguard by the Plan for management services amounted to $200 for the year ended December 31, 2010.


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6. Tax Status

On January 31, 2006, the Internal Revenue Service (“IRS”) stated that the prototype adopted by the Plan, as then designed, qualifies under Section 401(a) of the Internal Revenue Code (“IRC”). The Plan has not received a determination letter specific to the Plan itself; however, the plan administrator believes that the Plan was designed and is being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan’s financial statements. Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of both December 31, 2010 and 2009, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2007.

7. Risks and Uncertainties

The Plan’s investments are concentrated in funds that invest in marketable securities. Such securities are subject to various risks that determine the value of the funds. Due to the level of risk associated with certain securities and the level of uncertainty related to changes in the value of these securities, it is at least reasonably possible that changes in market conditions in the near term could materially affect participants’ account balances and the value of investments reported in the financial statements.

8. Reconciliation of Financial Statements to Form 5500

The following is a reconciliation between the statement of net assets available for benefits per the accompanying financial statements and the Form 5500 as of December 31,:

2010 2009(Compiled)

Net assets available for benefits per the financial statements 20,841,392$ 16,586,600$

Employer contribution receivable - (1,128,874)

Net assets available for benefits per Schedule H of form 5500 20,841,392$ 15,457,726$

The following is a reconciliation between the statement of changes in net assets available for benefits per the accompanying financial statements and the Form 5500 for the years ended December 31, 2010:

Net increase per the financial statements 4,254,792$

Plus employer contribution receivable at December 31, 2009 1,128,874

Net increase per Schedule H of Form 5500 5,383,666$

North American Electric Reliability Corporation Savings and Investment PlanSchedule of Assets (Held at End of Year)(Line 4i of Schedule H to the 2010 Form 5500)EIN: 20-4821888 - Plan Number: 002December 31, 2010

(a) (b) (c) (d) (e)

Description of Investment, Including Maturity Date,

Identity of Issuer, Borrower, Rate of Interest, CollateralLessor or Similar Party Par or Maturity Date Cost Current Value

* Vanguard Prime Money Mkt Money Market Fund 1,988,113$ Neuberger Berman Genesis Fund Registered Investment Company 5,438

* Vanguard 500 Index Inv Registered Investment Company 1,897,814 * Vanguard Explorer Fund Inv Registered Investment Company 1,081,685 * Vanguard Extend Mkt Index Inv Registered Investment Company 754,558 * Vanguard Int'l Growth Fund Inv Registered Investment Company 918,412 * Vanguard Morgan Growth Inv Registered Investment Company 811,010

Heartland Value Plus Registered Investment Company 9,122 * Vanguard Sm-Cap Growth Index Registered Investment Company 5,422 * Vanguard Tgt Retirement 2015 Registered Investment Company 348,438 * Vanguard Tgt Retirement 2025 Registered Investment Company 932,882 * Vanguard Tgt Retirement 2035 Registered Investment Company 1,185,878 * Vanguard Tgt Retirement 2045 Registered Investment Company 385,232 * Vanguard Target Retirement Inc Registered Investment Company 414,080 * Vanguard Total Bd Mkt Indx Inv Registered Investment Company 3,091,202 * Vanguard Total Int'l Stock Idx Registered Investment Company 1,632,361 * Vanguard Wellington Inv Registered Investment Company 1,159,135 * Vanguard Windsor Inv Registered Investment Company 1,589,564 * Vanguard Windsor II Fund Inv Registered Investment Company 1,093,089 * Participant loans Interest range (4.25% - 9.5%) 157,353

Total 19,460,788$

(*) Party-in-interest to the Plan

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North American Electric Reliability Corporation Savings and - NERC